In IR35

The Recruitment and Employment Confederation (REC) has called for input from the staffing industry in response to the new government consultation on proposals to extend public sector IR35 reforms to the private sector.

The trade association’s Stakeholder and Engagement Manager, Karen O’Reilly, acknowledges that, while this is one of three alternative reform proposals put forward by Government in the consultation, it remains HMRC’s “lead option.” For those wishing to contribute to the response, Reilly identifies key issues contained in a summary of HMRC-commissioned research into the impact of IR35 reforms on the public sector that accompanies the consultation. She writes:

“Although the report is narrow in scope and focuses on just three areas of the public sector – education, healthcare and defence – it does highlight some of our main concerns with the government’s proposals.”

The issues, and the REC’s concerns, are as follows:

  • The report gives the impression that early teething problems with the reforms have now been ironed out. But this contrasts sharply with feedback the REC receives from its own member recruiters, who continue to express deep concerns about the Check Employment Status for Tax (CEST) tool and maintain that a simple replication of IR35 rules in the private sector would be a serious error.
  • The REC has “big questions” over the reliability of HMRC estimates that 90% of contracting professionals working through personal service companies (PSCs) in the private sector are failing to apply reformed IR35 rules to themselves when they should be doing so. It is similarly sceptical of Revenue estimates that the cost of non-compliance will expand to £1.2bn by 2022/23.
  • While the report shows reduced employment in the public sector areas reviewed since the reforms were introduced, and attributes this to reduced public sector employment in general, the figures also point to a significant discrepancy: engagement of off-payroll contracting professionals decreased more rapidly than on-payroll employees (much as the Government expected).
  • Of the Central Government Bodies (CSBs) surveyed, over half (51%) experienced difficulties in complying with the new rules, despite receiving dedicated support from the HMRC.
  • 47% of CSBs complained about insufficient time for preparing for the reforms. If reforms are to be fit for purpose, O’Reilly notes, they must be introduced over a realistic timeframe and accompanied with detailed support and guidance.
  • A third of CSBs reported difficulty in sourcing suitable contracting professionals after the reforms were introduced.
  • This was also widely reported by other public sector bodies, who also complained that procedures for filling contract vacancies had become considerably more time-consuming, following the reforms.

The REC will be collecting recruiter views and case studies on IR35 between June and July.

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